Did you know that making a mistake on your tax return is more common than you might think? Many people worry that fixing an error by amending their tax return might flag their account for an audit by the IRS. It’s a valid concern: does amending a tax return trigger an audit? In this blog, we’ll dive straight into that question.
We’ll look at whether correcting your tax return puts you at risk, explore the factors the IRS considers when deciding to audit, and explain the audit selection process. You’ll find clear, straightforward explanations to help you understand your rights and responsibilities without getting lost in complex tax jargon.
Does Amending a Tax Return Trigger an Audit?
Let’s immediately answer the question, “Does amending a tax return trigger an audit?”
Filing an amended tax return does not automatically mean you’ll be audited. The IRS understands that mistakes happen. Whether it’s forgetting to include a source of income or making a math error, correcting your return is seen as a step towards ensuring your tax information is accurate.
Just like your original return, the amended one goes through a review process. This doesn’t increase your chances of an audit, but like any tax return, it could be selected for further review based on the same criteria the IRS applies across the board.
Imagine you forget to report income from a side job, or you missed a deduction that could save you money. By amending your return, you’re essentially correcting your tax record. This action is responsible and shows your intent to comply with tax laws, not evade them. The IRS uses specific checks to decide which returns to examine more closely, focusing on accuracy and adherence to tax laws, not whether you get money back.
How Does the IRS Decide Who to Audit?
The IRS uses a few different methods to decide which tax returns to take a closer look at. Such methods include:
Computer Scoring
A big part of the process involves computers. The IRS has a system that gives each tax return a score. If your return score is high, it might mean there’s something unusual that needs a second look. If something seems off, they’ll ask you to explain it.
Comparison to Others
Your tax return might also be compared to others in similar situations. For example, if you’re a teacher, the IRS knows what most teachers earn and deduct from their taxes. If your return is very different from the norm, the IRS might ask why.
Random Selection
Sometimes, the IRS picks returns at random. Just like drawing names from a hat, your return could be chosen for an audit. It doesn’t mean you did anything wrong. It’s just your turn to show your work.
Remember, amending a tax return doesn’t trigger an audit. Still, there’s nothing wrong with being selected for one. The IRS just wants to verify the information. Most audits are straightforward and can be resolved easily, especially if you keep good records and report your income and deductions accurately.
How Do You Know If You’re Selected for an Audit?
If the IRS selects you for an audit, they will let you know through a formal notice in the mail. This isn’t a phone call or an email but an official letter sent to your address. It will tell you what parts of your tax return need a second look and how to proceed.
The letter will also include instructions on what information you need to provide. Normally they will ask for documents such as:
- Receipts: Organized by date with notes on purpose and business relation, including proof of mileage.
- Bills: Detailing the payee, service type, and payment dates.
- Canceled checks: Accompanied by related bills and reimbursement details.
- Legal papers: Descriptions of cases and their relevance to your business or deductions, e.g., divorce settlements, defense papers.
- Loan agreements: Details of the loan, including borrower names, property location, lender, amount, terms, and interest statements.
- Logs or diaries: Records of travel, business purposes, mileage, gambling outcomes, and job-hunting activities.
- Tickets: Marked with business reasons for travel and associated with related trip receipts.
- Medical and Dental records: Including account statements, benefits handbook, physician statements, and capital improvement documentation.
- Theft or loss documents: Insurance reports, police reports, photos/videos of damage, and appraisal reports.
- Employment documents: Policies on uniforms, education requirements, W-2 statements.
- Schedule K-1: Reporting income, losses, deductions, and credits for S corporation shareholders.
It’s important to respond to the IRS letter and follow the instructions carefully. If you’re unsure about anything, you can always ask for help from a tax professional like our experts at Creative Tax Solutions.
Can You Say No to a Tax Audit?
When the IRS selects you for an audit, it’s not really a request—it’s a requirement. Ignoring or refusing an audit can lead to more serious consequences, including additional fines and penalties.
Facing an audit can be stressful, but you don’t have to go through it alone. Creative Tax Solutions is here to stand by your side. Our mission is to offer top-notch accounting, tax, and advisory services. We’re dedicated to helping you manage your finances effectively, minimizing your stress, and making plans for your family’s and business’s future with confidence.
With our team, you have a partner who understands the intricacies of tax audits. We’re committed to guiding you every step of the way, ensuring you’re prepared and supported, and making the process as smooth and worry-free as possible.
